Tax Bulletin December 2012


A recurring topic of debate with tax inspectors is whether it is legitimate to claim from companies the withholdings they did not make from their employees (or other recipients) where, when the authorities’ review took place, those recipients had already reported the gross amount obtained in their personal income tax returns, and been taxed on the full amount. In these cases, the courts have made it clear that requiring the company to pay over those withholdings constitutes unjust enrichment for the tax authorities.

Where the recipients have not included that gross income, subject to withholdings, in their tax returns, the courts, at least to date, have been allowing the tax authorities to claim from the payer the withholdings not made, and they can impose penalties and claim late-payment interest.
But there can be another scenario, where the paying company pays over the withholdings to the tax authorities and the recipient does not agree to bear the cost of those withholdings, which often happens, for example, in disputed dismissals, where the company is required to pay into court the estimated gross amount of the severance payment .

Those cases have shown the existence of differences of interpretation by the various courts, some of which apparently disregard the mandatory withholdings to be made. At times, due to the long length of labor-related suits, companies do not know the amount of the withholding to be made but are required to pay the gross amount into court at the start of the proceeding. It would be reasonable to assume, in those cases, that, when the court case ends and the severance has finally been paid, the company would be allowed to recover the withholdings from that amount in order to pay them over to the tax authorities.

This does not always happen in practice, and the payer is required, at the time of the payment, to deliver the whole amount paid into court. To prevent the loss this entails for the payer, the Central Economic-Administrative Tribunal, in a decision dated October 25, 2012, held that a civil or labor court cannot ask a company to pay the gross amounts into court without subtracting the withholdings in question, given that the withholdings are required by tax legislation.

1.1 Corporate income tax.- Tax losses from statute-barred years cannot be audited (Andalucía High Court. Judgment of June 15, 2012) 
1.2 Corporate income tax.- Breach of formal requirements in electing to apply the special regime for corporate reorganizations does not prevent application of the regime (Supreme Court. Judgment of May 14, 2012) 
1.3 Personal income tax.- The chosen (individual or joint) tax treatment option can be changed if elected because of mistake by tax authorities (Catalunya High Court. Judgment of May 16, 2012) 
1.4 VAT.- Research work or technical testing (ancillary to the main activity) carried out in a state does not constitute a VAT fixed establishment (European Court of Justice. Judgment of October 25, 2012, in joined cases C-318/11 and C-319/11) 
1.5 Tax on activities that have an impact on the environment in Castilla la Mancha.- Incompatibility with tax on economic activities (Constitutional Court. Judgment of October 31, 2012) 
1.6 Tax on large commercial establishments in Asturias.- Compatibility with tax on economic activities and with real estate tax (Constitutional Court. Judgment of November 6, 2012) 
1.7 Collection proceeding.- Method for computing late-payment interest in the issue of new assessments after the previous ones have been overturned (Supreme Court. Judgment of October 25, 2012) 
1.8 Collection proceeding.- Validity of notice of order initiating enforced collection proceedings served at address provided for notice purposes in the public deed of sale of real estate even if it differs from tax domicile (Balearic Islands High Court. Judgment of July 24, 2012) 
1.9 Inspection proceeding.- Right to a complete reassessment (Supreme Court. Judgment of November 5, 2012) 

2.1 Corporate income tax.- Allocation of tax prepayments by a tax group among its members (Directorate-General of Taxes. Ruling V1979-12, of October 15, 2012) 
2.2 Personal income tax.- Civil and labor courts do not have jurisdiction to decide on the withholding tax to be deducted from amounts paid in enforcing judgments by those courts (Central Economic-Administrative Tribunal. Decision of October 25, 2012) 
2.3 Nonresident income tax.- Refund to nonresident mutual funds or insurance companies of the withholdings borne on dividends from Spain: some issues (Central Economic-Administrative Tribunal. Decisions of October 25, 2012) 
2.4 Inspection proceeding.- The inspectors cannot review elements already analyzed before in a partial inspection (Central Economic-Administrative Tribunal. Decision of October 19, 2012) 

3.1 Tax treatment of bank asset funds and of their unitholders 
3.2 Convention on Mutual Assistance in Tax Matters 
3.3 Information on assets and rights situated abroad 
3.4 Objective assessment method for personal income tax and special simplified VAT system for 2013 
3.5 Invoicing obligations: new regulations 

4.1 Amendments to the Bill adopting various tax measures 


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